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Tuesday, February 7, 2023

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Weakening Wednesday – Can Yellen Save the Day?

SPY 5 MINUTEI told you so!  

All of last week, I kept saying the market was only hitting highs because it was being manipulated that way and, by Friday we'd had enough and took our ill-gotten gains off the table once again.  This week, it's obvious we're in trouble – but it's a lot harder to sell your stocks when they're already in trouble, isn't it?

It's a very hard discipline to take winners off the table but you should scale out of posiitons on the way up the same way you should scale into them on the way down (and the Strategy Section at Philstockworld has a great article about scaling – also lots of additional commentary in chat below the article).  

There's nothing wrong with being in cash.  Yesterday, from 1pm until 2:30, we had on of our Live Futures Trading Workshops (replay available here) and our 4 trades made $360 by the close (4pm) for a very nice $100+ per hour salary for just trading a few contracts.  Our trade idea from yesterday's morning post (which you can get delivered to you pre-market, every day by SUBSCRIBING HERE) was to short the Nikkei (/NKD) at 14,350 and this morning we hit 14,050 – good for a $1,500 PER CONTRACT profit!  

SPX WEEKLYThat's one of the things you can do with cash.  We also have fun making earnings plays, like the FSLR trade we added to our Short-Term Portfolio yesterday.  That trade idea was:

I think it's worth a try at selling 5 July $75 calls for $3 ($1,500) and buying, to cover, 4 Jan $77.50/85 bull call spreads at $2 ($800) for a net credit of $700 – let's do a set of those in the STP

If FSLR is under $75 (it's about $69 after earnings), we pocket $700 PLUS whatever value remains on the January bull call spread (probably about half).  That's against zero cash outlay ($700 credit, in fact) and possibly we'll just take quick money off the table and reload for our next earnings trade.  

This morning, ahead of Yellen's 10am speech, we flipped bullish on the Russell Futures (/TF) at 1,105 in our early morning Member Chat and we've already tested 1,110, which is $500 up from that line (though we were more like 1,106 by the time we caught it for +$400 in an hour).  We're done with the long ahead of the Productivity Report at 8:30 – which we expect to be disappointing.  Also this morning, I reiterated our short entry on oil at $100.20 and we already got a dip back to $100, but our goal is $98.50 after inventories (10:30) though now we'd stop out again over $100.20 and wait for a better entry – so stay tuned!  

We've been watching Brent Crude contracts drifting lower and USO (based on WTIC, which is what the /CL Futures reflect) usually tracks it very closely and now Brent is at $107.25, back where it was in early April, when WTIC was under $99.  That is pegging our BS meter to 8.5, especially since the Ukraine crisis SHOULD be supportive of Brent – and it isn't.  That's a huge red flag for oil bulls (the kind they run into and get skewered).  

Speaking of getting skewered:  Here's the Productivity report and is SUCKS – down 1.7% for Q1 and, even worse for our Corporate Masters – Unit Labor Costs are up a whopping 4.2%.  In other words labor costs are rising and they can't whip the wage slaves any harder than they already are.  

There are no cheaper places left to outsource, even CHINA!!! has been dealing with growing labor unrest as it becomes more and more clear that the Communist Party, which was founded to benefit the country's workers and peasants – has become a Billionaire's club for oligarchs – almost as bad as the US (but not quite).  

In China, there is a common saying,” says Lin Dong, of the Labor Dispute Center. “The government doesn’t help the people fix their problems. They fix the people who point out the problems, instead.”  Workers who were valued principally as inexpensive production cogs during China’s initial economic flowering are now expected to star as consumers. Consumption accounts for only 35 percent of the Chinese economy, well below the 50 percent-plus characteristic of East Asian countries such as South Korea, which modernized earlier.

It’s like that old Henry Ford story: I’ve got to pay my workers enough so they can buy my product,” said David Dollar, a former U.S. Treasury Department official in Beijing. “China’s reaching that Henry Ford moment.”  

Unfortunately, the US is far from that "Henry Ford Moment," as you can see from the chart above.  Let's face it, we're a nation of timid sheep who have just sat back and taken it while our wages have flatlined for 25 years while UK workers (the above example) were given 30% increases.  At least the Chinese are smart enough to march – what the hell is wrong with US?

Maybe the rising Unit Labor Costs are finally a sign that US workers are not going to take it anymore.  If so, that will be a long-term benefit for the economy but, in the short run, companies that are addicted to low wages like WMT, NKE, MCD, etc. are in for a bit of pain.  

 

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tsla guidance ? shares are dropping

Wolf / Phil – I don't think he meant to invest in NFLX or TSLA… But more risk than 30 year bonds paying 3%. And he does mention that in absence of individuals taking the risks, government should pick up the slack… Makes sense to me.

Just arriving of a visit to London  our sons invited us for 60´s….I think it cost me about $ 3,500 or more being out of Phil recommendations, but don´t tell them!  (lol), will try to recover in the next days.

Phil / RB   Question,  it got a nice dip  and today recovered, what you think still is feasible a long  around $3.00  ?…behaves with oil report?

Thanks.

RIG

Transocean beats by $0.41, beats on revs .

albo

Where are you getting your early reads on earnings? THX

Tesla's deliveries, spending to ramp in Q2 • 4:22 PM

Tesla (TSLA) produced 7,535 Model S units in Q1, up from Q4's 6,587 and above guidance of 7,400. The company delivered 6,457 units, slightly above guidance of 6,400 but below Q4's 6,892.

Tesla expects to produce 8.5K-9K Model S units in Q1, and to deliver 7,500. Leases are only expected to account for ~200 deliveries due to lead times.

Gross margin was 25.4%, +20 bps Q/Q in spite of a $2M reserve for underbody shield retrofits. GM is expected to improve slightly Q/Q in Q2, and to reach 28% in Q4.

SG&A spend rose 150% Y/Y to $117.6M, R&D spend rose 17% Q/Q and 48% Y/Y to $81.5M. SG&A is expected to grow 15% Q/Q, and R&D 30%.

Operating cash flow was $61M, and capex totaled $141M. The full-year capex forecast is still at $650M-$850M.

The company expects to be "marginally profitable" in Q2; the consensus is at $0.27. Full-year free cash flow is expected to be slightly negative.

Shares -4.9% AH

MCP getting flogged AH on poor earnings.

TNA – my comments concerning movement should have referred to calls, not puts.

Bought 10k's (1000 shares) at $1.70 at. 9:49. Bought 20k's at .87 at 10:35 and with the RUT down at 1097 at 11.27 bought 20 more contracts at .73.  My average price was .98 cents.  The last buy was right after Phil stated we were due for a bounce. ( And thanks for that Phil, as it confirmed my own suspicions and added to. My confidence to stick with the position).

Eigthteen minutes later sold 10k's at $1.30; at 12:24 10 more at $1.28; sold 20 at $1.17 at 2:47 and the 

 

final 10k's at $1.30 at 3:49pm as the market rose into the close.

So that's a day with a day trader. No break from 8 to 4, no lunch no bathroom breaks.  Along the way accumulated a position in DIA 165 put's at average of $1.40.  

Dclark41 – From Briefing Trader.

denlundy – Where did you spend this day?  New firm?

Phil: this guy need some help, maybe you should talk to him.

https://www.indiegogo.com/projects/solar-roadways

Burrben – In the comfort of my office – gone independent – couldn't take the bull shit any longerany longer

Burrben – In the comfort of my office – gone independent – couldn't take the bull shit any longerany longer

Albo, insightful but:

For today’s Outside the Box, Rich has written a piece that summarizes his chief concerns about the domestic economy in 2014. Those concerns focus around the fact that growth in both real disposable personal incomes (adjusted for inflation and taxes) and consumer spending have barely advanced in the wake of the Great Recession.

In compensation – and it’s an unhealthy form of compensation – government transfer payments as a percentage of disposable income have grown from 9% in 1970 to nearly 20% today.

These 2 problems go hand in hand – the lower 50% don't see their income rise so they have to rely more and more on government programs. Can't blame them for that and we can't blame the government for helping them either. If more of the wealth would actually trickle down some more instead of gushing up, we would not have that problem.

I'm still not clear on why TSLA dropped 8% AH, when they beat top and bottom with their BS NonGAAP acrobatics // 
thanks jabo – saw the highlights. Is this a push it down so all my bankster friends can get in 
or
guidance is becoming a little clearer and sanity is returning, regardless of the numbers this Q ?
anyone ?

Few important notes from the Q1 Release:

 

1.Very weak beat on Model S deliveries for a bar that was set very low (6400)

 

2. Guidance of marginally profitability in Q2 when expectations are for $0.27 EPS in Q2 (more than double this quarter's non-gaap net income)

 

3. Guidance of negative free cash flow for the year. How will Tesla finance debt payments and the giga factory with negative FCF?

 

Tesla needs hockey-stick growth in the second half of 2014 to justify current price

TSLA / Wombat – Maybe a nice tweet from Musk could do it!

Best volume in a week. But Russell could not break above its 200 DMA!

It was a year ago that we moved our lines!

StJ / TSLA
Would have to be Giga-Tweet 

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